Again With the Bubbles?

A few years back ? it seems like an eternity today ? the U.S. stock market experienced a severe bubble burst. Legitimate stocks rose beyond reasonable valuations and ideas merely in the germination stage sold for prices far beyond those of real proven companies. When the bubble burst, billions of dollars of shareholder value evaporated. One would have thought we'd learned our lesson.

Today, Yahoo and EBay, the two leading internet companies, again sell for prices beyond reasonable value. Again, people seem content to listen to a good story and place unrealistic valuations on companies that have no earnings or real prospects. Google's recent IPO is proof positive that the market is still bubble-icious. Even stocks like General Electric are selling at prices above what the market should bear. What's the story?

The story is, very simply, that we don't learn lessons very well. Also, if you think about it, a lot of people actually made money back in the late 90's during the bubble. So, there's a case to be made for gambling on another similar adventure. If we can survive the "greater fool" theory, and find someone willing to pay more than we are, it almost doesn't seem dangerous to buy a stock that has little or no intrinsic value, as long as there's a belief that someone else might eventually pay more. So much for value investing!

No, the "experts" are now convinced that stocks and markets do not move in line with actual events, but instead move along with emotions and trends. Thus, the big money is chasing itself, going where it goes simply because it is going there. Does that make sense to you? I hope not.

We've held firmly to the seemingly outdated position that value does matter. We differ from some value investors, such as Warren Buffett, who avoids technology and new ideas: we do believe such stocks can have merit. We also hold firm to the idea that stocks will eventually return to their real value?or at least move toward that point in the end.

In these days when emotion seems to dominate reason, it is not unlikely for the whipsaw effect to be stronger than the reality effect. But we believe that, even in the midst of such insanity, having a focus on reality is worth something?even if no one else believes it.

For questions or comments, Scott Pearson can be reached directly at Scott@valueview.net or by visiting www.valueview.net

Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.

---

Stock Market Investments

If there is one term over-used when talking about making... Read More

What is a Trading Plan ? and Why You Need One?

How do you make money without picking tops and bottoms?I... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

Investment Capital Gains

Have you bought any mutual funds this year or late... Read More

Stuff

I continually hear from economists, talking heads, other market letter... Read More

Dont Spend Another Dollar on Business Opportunities Until You Read This

With an insecure job market, overworked employees, insufficient retirement savings... Read More

This Market Is Different

All of the talking heads have been telling us that... Read More

Why Buy and Hold?

Since I can remember, and that's a long time ago,... Read More

Stock Trading - Daddy, Why Arent We Rich?

One Saturday morning, while he was sitting at his computer... Read More

Why Technical Indicators

The fight continues to rage among traders who use technical... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

Invest In The Stock Market For The RIGHT Reason, Using The RIGHT Choices

Invest in the stock market for the RIGHT reason, using... Read More

Stock Market Investing: Knowing When (and when not) to Sell

One of the greatest challenges of investing in stocks is... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Investment Attorneys and Garbage Stocks

How is it possible that trash Companies are posting less... Read More

Dollar Cost Averaging

Dollar cost averaging is one of the most popular ideas... Read More

DIY Portfolio Management

Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

Trapeze Artist - Swinging with the Stock Market

When we go to the circus we see a trapeze... Read More

Emotional Involvement

I'll bet with almost anyone that has stocks or mutual... Read More

The Surgeon General

The Surgeon General of the United States says that smoking... Read More

Dividend Paying Stocks

I would like to share with the reader an article... Read More

Stock Market Insanity

Let's first define insanity. It is doing the same thing... Read More

Complacency Indicator

If you haven't heard of the technical indicator with the... Read More

The Stock Market - Part 1: Believe It Or Not, Its Always Been Your Best Friend And Always Will Be

Regardless of the fact that the world's stock markets have... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

How Covered Calls Turned a Trader Around

Sidney felt sick as she looked at her latest OptionsXpress... Read More

Commoditizing the world

Let's discuss commodities; with the latest Enron situation, it is... Read More

Making a Stock Watch List

I am taking the time to help others learn the... Read More

Never Lose Money

Never lose money in the stock market again. Yeah, I... Read More